South Korea is reportedly considering abolishing income tax on cryptocurrency gains as it looks to revamp its tax laws on financial investments in a new proposal. While speaking to reporters on January 17, Jeong Jung-hoon, the South Korean Deputy Minister of Economy and Finance, hinted at the proposal, charging the Korean National Assembly to consider it for discussion.
Jeong made the statement in response to a barrage of questions from the press after the abolition of taxes on cryptocurrency gains as part of the new financial investment regime. While his answer indicates that the tax arrangement has no plans for cryptocurrencies yet, the bullish stance of the South Korean government regarding virtual assets gives crypto investors some hope.
The statement comes amid a pledge from South Korean President Yoon Suk Yeol to scrap capital gains tax on financial investment returns, including on cryptocurrencies. As things stand, the decision appears to be up to the National Assembly, the legislative arm of the South Korean government.
About the Proposed Crypto Tax Law
The South Korean government, led by President Yoon Suk Yeol, is planning to submit an amendment to the longstanding income tax law to modify financial investment taxation. According to reports by South Korean media, the government may propose the new bill for consideration by late January or early February, expecting the parliament to consider it before elections in April.
The statement from the Deputy Minister of Economy and Finance, Jeong Jung-hoon, hints that crypto stakeholders can expect tax abolition proposals for crypto investments within the bill.
It wouldn’t be the first time the South Korean government would propose abolishing taxes for an asset class, as it had submitted a similar tax abolition proposal for gold investments. Seeing the potential of a tax-free crypto exchange system, lobbyists started building pressure on the government for similar measures for cryptocurrencies.
Regardless of the outcome of the National Assembly, the new crypto tax regime will not take effect until at least January 1, 2025. Note that the South Korean parliament is yet to officially receive a bill from the presidential cabinet regarding crypto taxes; at this point, everything is rumors and speculation.
What Should We Expect?
While the president and his cabinet seem open to the idea of abolishing capital gains tax on returns from crypto investments, it appears the final decision is ultimately up to the South Korean parliament, and there are indications that several lawmakers in parliament are not receptive to the idea.
Following the domination of the opposition party in parliament, several MPs are inclined to oppose some policies, which crypto tax eradication is quickly making itself out to be. Allegations of insider trading by some South Korean MPs also mean many would be unwilling to support pro-crypto proposals, even if they stand to benefit from it.
Consequently, there is little wonder why the current South Korean administration may encounter challenges passing the crypto tax eradication bill, even with presidential support.
However, writing off the possibility of crypto tax abolition is also wrong. A lot could change the narrative. Regardless of the decision of the National Assembly, South Korean cryptocurrency investors should know the outcome before the upcoming legislative elections in April.
South Korea is Evolving as a Major Crypto Hub
Thanks to its stringent but relatively productive regulatory framework on virtual assets, South Korea is an emerging market leader in cryptocurrency adoption and regulation in Asia. Over the past few months, South Korea has proposed several new crypto regulations, focusing on market stability and investor protection.
A law to eradicate capital gains tax on cryptocurrency investments will further enhance its growing image as a hub for cryptocurrency investors, fueling the speedy adoption of cryptocurrencies and other digital assets on the Korean peninsula.
Despite the surprisingly liberal outlook towards cryptocurrencies, discussions regarding Spot Bitcoin ETFs are losing momentum in South Korea, with most experts ruling out any possibility of regulators approving Bitcoin-based securities legislation before the April elections.
Recall that the United States Securities and Exchange Commission (SEC) recently approved Spot Bitcoin ETFs for listing on US stock exchanges despite the regulator’s known hostilities towards cryptocurrency firms.
